Sales of existing homes in U.S. increase to three-year high

Sales of previously owned U.S. homes rose in February to the highest level in more than three years, sustaining a rebound that is bolstering growth.

Purchases increased 0.8% to a 4.98 million annualized rate, the most since November 2009, figures from the National Association of Realtors showed today in Washington. The median forecast of 77 economists surveyed by Bloomberg called for an increase to a 5 million pace.

Growing demand for homes combined with limited supply is pushing property values up, leading to gains in household confidence and wealth that are helping propel consumer spending. Easier access to credit and bigger gains in the labor market may be needed to give the housing market an additional boost and ensure it will keep contributing to the economy.

“Home sales are trending up at a moderate rate rather than at a rapid rate,” said Michael Moran, chief economist at Daiwa Capital Markets America Inc. in New York, who correctly forecast the February pace. “The inventories are said to be tight in many markets, and that’s holding sales back to a degree.”

Estimates in the Bloomberg survey ranged from 4.85 million to 5.15 million. The prior month’s pace was revised to 4.94 million from a previously reported 4.92 million.

Federal Reserve policy makers yesterday said they will continue to buy securities at a pace of $85 billion a month to spur economic growth and reduce unemployment.

Fed View

The central bank said it “continues to see downside risks to the economic outlook,” according to the statement. It also said the “the housing sector has strengthened further, but fiscal policy has become somewhat more restrictive,” acknowledging that the federal budget cuts triggered at the start of the month may restrain growth.

Other reports todays showed claims for jobless benefits last week rose less than forecast, manufacturing in the Philadelphia region unexpectedly expanded in March and the index of leading indicators rose more than forecast in February.

Stocks held earlier losses after the report as German manufacturing unexpectedly contracted and Cyprus’s president worked on a new plan to obtain a European bailout. The Standard & Poor’s 500 Index fell 0.6% to 1,548.74 at 10:24 a.m. in New York. The benchmark index climbed yesterday to within seven points of its record reached in 2007.